What does 2021 hold for home insurance?
The pandemic’s work-from-home trend and climate change have had a definite impact on the home insurance sector.
On the one hand, many employees have been living and working from their home office because of the threat of COVID-19. Because of this, they’ve had constant oversight of their dwellings.
This change in domestic living habits has helped prevent theft and fire and water damage while leading to a 10.26 per cent drop in home insurance claims in Canada – saving insurance companies about $1.1 billion in 2020, according to Hellosafe.ca.
As temporary working situations become more permanent, it is expected the home insurance market will likely see a similar or greater reduction in claims costs throughout 2021.
The trend has also left many office buildings temporarily vacant or led to some interesting dynamics regarding the repurposing of office buildings.
“While some businesses are planning to make work-from-home more permanent and others are simply reducing their square footage, the office market is similarly being retrofitted for residential use,” reports HUB International. “Whether it’s a downtown high-rise or an old two-storey Art Deco office building renovated into condos, shrinking office space in highly populated areas will give way to a rise in residential properties.”
Climate change, too, has had a major impact on home insurance. In 2020, extreme weather events, ranging from the Fort McMurray flooding to the Calgary hailstorms, led to $2.4 billion worth of damages in Canada, according to Catastrophe Indices and Quantification, as well as $270 billion globally, according to Munich Re.
Catastrophes likely to affect rates
As a result, HUB International predicts rates will rise between 15 and 25 per cent or higher in areas exposed to catastrophes such as earthquakes, flooding, hail, and windstorms. And we all know Mother Nature is bound to be back in 2021 with increasing risks for homeowners.
Meanwhile, condo and multi-family home insurance rates are also rising due to an increase in the frequency and severity of claims in the sector; a rise in repair, rebuilding and property maintenance costs; and general market trends.
According to HUB International, an uptick in claims in the apartment and condominium market due to fires, water escape, wind/hail, and flooding have reduced the number of insurance carriers willing to insure this class.
For this reason, as we move into 2021, the multi-family residential sector can expect to see another 20 to 50 per cent increase, along with further increased deductibles in their general property coverage.
Residential apartment and condominium properties looking to weather this storm will need to show insurers what type of controls they have implemented to prevent common, high-frequency, and severe water and fire claims.
So, what’s a regular homeowner to do? First, it’s important to talk to your broker at renewal time about your coverage needs. If your current insurer has raised their rates, your broker can shop the market for you ensuring you get the most competitive rate for the coverage you need. Another possibility to keep rates lower is to raise your deductible.
Second, while no one can control Mother Nature, homeowners can take specific steps to protect their investment. That could include the installation of a sump pump or sewer backflow valve.
The bottom line? If you’re a homeowner, prevention and maintenance are key. And so is shopping around with the expert advice of your broker.
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